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MainStreet Bancshares Inc. Reports a Profitable Second Quarter
Rise in Core Deposits Fueled an Uptick in Loan Growth
FAIRFAX, Va., July 29, 2024 /PRNewswire/ -- MainStreet Bancshares, Inc. (NASDAQ:MNSB, MNSBP)), the holding company for MainStreet Bank, reported net income of $2.6 million for the second quarter of 2024.
Total deposits reached $1.8 billion in the second quarter, an increase of 10.2% from the second quarter of 2023. Loan growth is up 8.6% over the same period, also reaching $1.8 billion.
"We are now nine full quarters into the current interest rate cycle, and the entire industry has felt the effect of higher deposit costs. I'm happy to report that we experienced the softest impact this quarter, with our net interest margin settling in at a healthy 3.15%," said Jeff W. Dick, Chairman and CEO of MainStreet Bancshares, Inc. and MainStreet Bank. "We see signs of an improving net interest margin going forward, but FOMC actions or other unforeseen externalities could affect momentum. Externalities aside, as our strategic initiatives start to bear fruit, we are confident and optimistic that the trail we have blazed to offer Banking as a Service (BaaS) will positively affect our net interest margin and our bottom line."
"We remain focused on caring for our customers and meeting their continuing banking and borrowing needs while judiciously adding promising new relationships," said Abdul Hersiburane, President of MainStreet Bank. "We've built our core customer funding sources up to 78% of total deposits."
Loan growth in the second quarter was driven by a healthy rise in demand for commercial and industrial borrowing and in high-quality owner-occupied commercial real estate lending, a traditional area of strength for MainStreet Bank.
The Bank maintains a strong portfolio of earning assets, with very nominal AOCI exposure. The loan portfolio remains solid with net charge offs representing a mere eight basis points of average gross loans. Nonperforming assets account for 0.99% of total assets.
"We continue to carefully underwrite each loan opportunity and the lending team remains engaged with each borrower throughout their project lifecycle. If a borrower experiences a challenge, we work with them to face that challenge promptly and transparently," said Tom Floyd, EVP and Chief Lending Officer at MainStreet Bank. "We have a meticulous understanding of our loan book and a rigorous risk management mindset."
Banking-as-a-ServiceIn recent months, the weaknesses of other embedded banking solutions have been exposed—to the detriment of banks, their fintech clients and their end-customers. The Avenu team digested all the lessons that could be learned from these weaknesses and is implementing final enhancements to ensure a scalable and compliance-rich solution. Avenu is live and in limited production until the final enhancements are fully integrated.
Avenu Avenu is the first and only embedded banking solution that connects our partners and their apps directly and seamlessly to our purpose-built Avenu core solution. We are not a sponsor bank without our own technology, and we are not a middleware software company without our own bank. We are Avenu, a leading financial technology company owned by an established community bank in the heart of Washington, D.C.
Avenu's clients are fintechs, social media, application developers, money movers, and entrepreneurs. They all have one thing in common: They are innovating how money moves to solve real-world issues and help communities thrive. We are focused on servicing our community and creating long-term business relationships.
ABOUT MAINSTREET BANK: MainStreet operates six branches in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington, D.C. MainStreet Bank has 55,000 free ATMs and a fully integrated online and mobile banking solution. The Bank is not restricted by a conventional branching system, as it can offer business customers the ability to Put Our Bank in Your Office®. With robust and easy-to-use online business banking technology, MainStreet has "put our bank" in thousands of businesses in the metropolitan area.
MainStreet Bank has a robust line of business and professional lending products, including government contracting lines of credit, commercial lines and term loans, residential and commercial construction, and commercial real estate. MainStreet is an SBA Preferred Lender. From sophisticated cash management to enhanced mobile banking and instant-issue Debit Cards, MainStreet Bank is always looking for ways to improve our customer's experience.
MainStreet Bank was the first community bank in the Washington, D.C., metropolitan area to offer a full online business banking solution. MainStreet Bank was also the first bank headquartered in the Commonwealth of Virginia to offer CDARS – a solution that provides multi-million-dollar FDIC insurance. Further information on the Bank can be obtained by visiting its website at mstreetbank.com.
This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. The statements contained in this release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursuant," "target," "continue," and similar expressions are intended to identify such forward-looking statements. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, future impacts of the novel coronavirus (COVID-19) outbreak, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.
MainStreet Bancshares, Inc.
UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands)
June 30, 2024
March 31, 2024
December 31, 2023*
September 30, 2023
June 30, 2023
ASSETS
Cash and cash equivalents
Cash and due from banks
$
41,697
$
49,208
$
53,581
$
44,912
$
67,700
Federal funds sold
49,762
75,533
60,932
76,271
30,341
Total cash and cash equivalents
91,459
124,741
114,513
121,183
98,041
Investment securities available for sale, at fair value
57,605
58,699
59,928
56,726
60,579
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $0 for all periods
16,036
17,251
17,275
17,565
17,590
Restricted equity securities, at amortized cost
26,797
23,924
24,356
20,619
20,304
Loans, net of allowance for credit losses of $17,098, $16,531, $16,506, $15,626, and $16,047, respectively
1,778,840
1,727,110
1,705,137
1,681,444
1,637,484
Premises and equipment, net
13,787
14,081
13,944
14,275
14,427
Accrued interest and other receivables
11,916
10,727
12,390
11,184
10,256
Computer software, net of amortization
17,205
15,691
14,657
13,373
12,266
Bank owned life insurance
38,901
38,609
38,318
38,035
37,763
Other assets
41,200
39,182
34,914
47,087
40,641
Total Assets
$
2,093,746
$
2,070,015
$
2,035,432
$
2,021,491
$
1,949,351
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits
$
314,636
$
348,945
$
364,606
$
394,859
$
388,992
Interest bearing demand deposits
179,513
165,331
137,128
76,423
71,308
Savings and NOW deposits
60,867
46,036
45,878
46,550
51,294
Money market deposits
476,396
446,903
442,179
461,398
380,500
Time deposits
723,951
725,520
696,336
703,960
701,289
Total deposits
1,755,363
1,732,735
1,686,127
1,683,190
1,593,383
Federal funds purchased
—
—
15,000
—
30,000
Subordinated debt
72,841
72,741
72,642
72,543
72,444
Other liabilities
40,827
41,418
40,146
52,015
43,016
Total Liabilities
1,869,031
1,846,894
1,813,915
1,807,748
1,738,843
Stockholders' Equity:
Preferred stock
27,263
27,263
27,263
27,263
27,263
Common stock
29,452
29,514
29,198
29,188
29,177
Capital surplus
66,392
65,940
65,985
65,407
64,768
Retained earnings
109,651
108,334
106,549
102,694
97,646
Accumulated other comprehensive loss
(8,043)
(7,930)
(7,478)
(10,809)
(8,346)
Total Stockholders' Equity
224,715
223,121
221,517
213,743
210,508
Total Liabilities and Stockholders' Equity
$
2,093,746
$
2,070,015
$
2,035,432
$
2,021,491
$
1,949,351
*Derived from audited financial statements
MainStreet Bancshares, Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(In thousands, except share and per share data)
Year-to-Date
Three Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
INTEREST INCOME:
Interest and fees on loans
$
62,034
$
55,586
$
31,546
$
30,487
$
30,849
$
29,750
$
28,855
Interest on investment securities
Taxable securities
865
926
430
435
451
459
407
Tax-exempt securities
538
529
268
270
268
268
265
Interest on federal funds sold
2,264
2,311
1,083
1,182
1,510
1,217
1,179
Total interest income
65,701
59,352
33,327
32,374
33,078
31,694
30,706
INTEREST EXPENSE:
Interest on interest bearing demand deposits
4,032
594
2,172
1,860
1,058
240
251
Interest on savings and NOW deposits
347
255
190
157
146
145
147
Interest on money market deposits
10,816
4,129
5,638
5,178
5,639
4,156
2,926
Interest on time deposits
17,861
11,221
9,027
8,833
8,257
7,526
7,077
Interest on federal funds purchased
298
239
191
107
25
35
201
Interest on Federal Home Loan Bank advances
46
919
—
46
118
186
13
Interest on subordinated debt
1,640
1,632
820
820
828
828
820
Total interest expense
35,040
18,989
18,038
17,001
16,071
13,116
11,435
Net interest income
30,661
40,363
15,289
15,373
17,007
18,578
19,271
Provision for (recovery of) credit losses
443
921
638
(195)
466
255
638
Net interest income after provision for (recovery of) credit losses
30,218
39,442
14,651
15,568
16,541
18,323
18,633
NON-INTEREST INCOME:
Deposit account service charges
959
1,125
490
469
510
514
535
Bank owned life insurance income
583
514
291
292
283
272
259
Net loss on securities
(48)
—
(48)
—
—
—
—
Other non-interest income
270
174
140
130
68
177
16
Total other income
1,764
1,813
873
891
861
963
810
NON-INTEREST EXPENSES:
Salaries and employee benefits
14,972
14,216
7,484
7,488
7,129
6,924
6,595
Furniture and equipment expenses
1,875
1,270
940
935
804
713
772
Advertising and marketing
1,020
1,495
566
454
271
577
698
Occupancy expenses
849
912
415
435
397
375
426
Outside services
1,614
994
839
774
352
697
504
Administrative expenses
471
426
229
242
219
277
211
Other operating expenses
4,190
3,242
2,195
1,996
1,964
1,866
1,646
Total non-interest expenses
24,991
22,555
12,668
12,324
11,136
11,429
10,852
Income before income tax expense
6,991
18,700
2,856
4,135
6,266
7,857
8,591
Income tax expense
1,068
3,602
238
830
1,120
1,516
1,645
Net income
5,923
15,098
2,618
3,305
5,146
6,341
6,946
Preferred stock dividends
1,078
1,078
539
539
539